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Magna International looking for acquisitions after reporting higher profits

By: Craig Wong, The Canadian Press

Posted: 03/1/2013 5:58 AM | Comments: 0 | Last Modified: 03/1/2013 3:27 PM

Guests attend a Magna International annual general meeting in Toronto on May 10, 2012. THE CANADIAN PRESS/Aaron Vincent Elkaim

Auto parts maker Magna International (TSX:MG) is looking to make acquisitions, especially in Asia where it sees the market growing, chief executive Don Walker said Friday.

"I don't want to go out and make an acquisition for the sake of making an acquisition, but we've got a very high focus on growing this year," Walker told a conference call with financial analysts.

The comments came after the company reported improved earnings and raised its outlook for North American vehicle production and sales for the year.

Magna also increased its dividend quarterly to 32 cents per share from 27.5 cents.

With $1.1 billion in net cash on its books and $2.05 billion in unused credit lines, Magna has the dry powder to make deals.

"We don't want to be sitting on a billion dollars in cash just to be sitting on a billion dollars in cash," Walker said.

He said the company made a couple of acquisitions last year and continued to look at what he called "a lot" of possibilities.

"At some point in time Europe will rebound, so there might be some opportunities to get some more reasonably priced companies that have good technology or are a good fit with us," he said.

For the fourth quarter, the Ontario-based company, which is one of the largest auto parts makers in the world, said it earned US$351 million or $1.49 per share, up from US$312 million or $1.32 per share in the fourth quarter of 2011.

The company also had a double-digit increase in sales, which rose by nearly 11 per cent to US$8 billion from $7.251.

On an adjusted basis, Magna earned $1.67 per share.

Magna also said it now expect sales for the year to be between $32 billion and $33.4 billion, up from a forecast in January of between $31.3 billion and $32.7 billion.

The increase was based on expectations for North American vehicle production to reach 15.8 million and Western Europe to produce 11.9 million, up by 500,000 and 100,000 respectively.

BMO Nesbitt Burns analyst Peter Sklar, who rated Magna an outperform with a US$61 price target, called the results "slightly positive" for the company.

"After normalizing for the beneficial effect of an unusually low tax rate, we calculate normalized fourth-quarter 2012 earnings were $1.24 per share, in excess of our estimate of $1.08 per share," Sklar wrote in a note to clients.

Magna's fourth-quarter results were driven by its North American business which saw vehicle production increase 12 per cent compared with a year ago, while it dropped eight per cent in Western Europe.

North American production sales increased to $3.9 billion for the quarter, up from $3.5 billion a year ago, while European production sales totalled $2.21 billion, up from $2.17 billion.

Production sales in the rest of the world, which includes China and Brazil, increased to $521 million compared with $386 million a year ago.

For the full year, the company earned $1.43 billion or $6.09 per diluted share on $30.8 billion in sales. That compared with a profit of $1.02 billion or $4.20 per share on $28.75 billion in sales in 2011.

Magna has more than 300 factories and 88 product development, engineering and sales centres around the world and more than 100,000 employees.

Shares in the company closed up $2.17 at $57.02 on the Toronto Stock Exchange on Friday.

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